4.1.1 Developing digital building data 4.1.2 Improving the quality of Energy Performance Certificates (EPCs) 4.1.3. Scaling-up for portfolios 4.2. Recommendations for the Taxonomy: Transformational Approach

4.2. Recommendations for the Taxonomy: Transformational Approach

While current ambition levels for the Construction of New Buildings and Building Renovation criteria appear reasonable when looking at the current market share of buildings actually meeting the respective criteria, they are too low to successfully address the pressing challenges of a changing climate.

The indicator ‘primary energy demand’ is not an adequate metric to reduce greenhouse gas emissions and the current ambition levels for all three examined activities are not at all in line with a Paris-aligned path for the entire sector. To improve existing and to ensure good performance of newer or renovated assets, energy monitoring and management systems are very valuable instruments and should always be accompanied by monitoring the greenhouse gas emissions and by setting target values.

Ideally, the achievement of intermediate target values would be set and monitored in line with a Paris-Agreement-compatible or aligned path. In order to prevent greenwashing, minimum energy and carbon reduction values per annum could be defined to specify that a building is efficiently operated.

The so-called ‘best in class’ approach reflects current market practice by some stakeholders, but successful application depends on availability of reliable data and needs to be carefully monitored. Apart from this, a trend can be seen that banks start setting up financial products aimed at transforming promising assets into Paris-aligned assets. Their efforts and the related financial flows are not reflected in the current criteria. For the Acquisition and Ownership criteria, both the construction and real estate and financial market could easily embrace the introduction of an additional Taxonomy class a strengthening of financial flows into transitional financial products.

Eligible buildings within this class would have to provide evidence for a ‘weaker-than-Class A’ requirement for the current carbon (or energy) performance (e.g. ‘GHG intensity better than average’), but » Climate protection is the topic of the hour. With the Taxonomy a way is opened for the transition of the economy would provide a solid investment plan for a step-by-step improvement, which would and the financial sector. But then it is precisely this transition be actively managed and monitored by that must be considered and stimulated. Financing energy- the owner and the bank and would be in efficient green buildings is important, but buildings that have the potential to become green need recognition. « line with 1.5°C or 2°C limit carbon budget mechanisms.

Leoni Gros, Corporate Strategy at Berlin Hyp AG

The TEG report included a potential outlook on the development of the climate change mitigation criteria, instrumental in preparing market participants. This outlook foresaw a change of metric from primary energy to GHG intensity.

This could easily be implemented today as an alternative ‘GHG eligibility path’, potentially also supported by additional energy benchmarks, e.g. on final energy or useful energy. Such a roadmap (‘building specific climate action roadmap’) is building on the so-called ‘renovation passport’ concept, but is actually going transcending this by going towards a net-zero-GHG target within a specified limit.

With the current trend of rising carbon prices in Europe and the forecast of further dramatic increases in future, the longterm planning of renovation measures and necessary steps to reach carbon net zero is essential.

■ Elements for the climate change mitigation criteria of a

‘transitional approach’: GHG emissions intensity average or above average plus Paris-aligned specific ‘climate action roadmap’ in operation

■ Eligibility condition 1: GHG emission intensity of existing building based on final energy demand below carbon benchmark that represents at least average GHG emission intensity (for non-residential buildings e.g. use of the so-called Carbon Risk Real Estate Monitor (CRREM) benchmarks as starting point or Climate Bond Initiative benchmark - see www.crrem.eu and https://www.climatebonds.net/ ■ Eligibility condition 2: Paris-aligned building specific climate action roadmap is specified and in operation. A ‘climate action roadmap’ is similar to a renovation passport, listing all necessary improvement measures and their realisation dates, but based on carbon metrics, limiting carbon emissions over time by applying an emission trajectory/path, that shall not be exceeded (according to a carbon budget approach) and resulting in net zero carbon emissions by, at the very latest, 2050 or in line with a recognised science-based targets approach.

Demand based EPC available?

No Yes GHG intensity better than average (e.g. x% below CRREM/ CBI value/ Class C)?

No Yes Paris-aligned climate action roadmap available, in operation and finance plan?

No Yes Eligible for “transitional GHG path”

Non-eligible

Figure 15: Proposed additional ‘Transitional GHG path’ – Building operated and improved according to Paris-aligned Climate Action Roadmap